Asked by Abbie Medina on May 16, 2024
Verified
According to the concept of framing effects,
A) advertising power is limited because of the inability of firms to change consumers' perspectives.
B) all people will assign the same utility to a given situation, regardless of their previous status quo.
C) whether a new situation is viewed as a gain or a loss depends on one's starting position.
D) firms should never raise prices or reduce wages.
Starting Position
The initial condition or status from which a process, negotiation, or competition begins.
Framing Effects
The influence on decision-making and judgments caused by the way information is presented, rather than just the information itself.
Utility
The total satisfaction or benefit derived by consuming a product or service, used to analyze choices made by consumers to maximize satisfaction.
- Acquire knowledge on the foundational aspects of prospect theory, with a focus on loss aversion and how the framing effect impacts economic activities.
Verified Answer
TA
Tatiana ArbelaezMay 23, 2024
Final Answer :
C
Explanation :
Framing effects suggest that the way information is presented (or "framed") can influence decision-making and judgment. Choice C correctly captures this concept by stating that whether a situation is perceived as a gain or a loss can depend on an individual's initial reference point or starting position. This reflects the idea that people's choices can be significantly affected by how options are framed, not just by the objective outcomes of the options themselves.
Learning Objectives
- Acquire knowledge on the foundational aspects of prospect theory, with a focus on loss aversion and how the framing effect impacts economic activities.